COMMODITY CREDIT CORPORATION CHARTER WEDNESDAY, JANUARY 21, 1948 UNITED STATES SENATE, COMMITTEE ON AGRICULTURE AND FORESTRY, WASHINGTON, D. C. The committee met, pursuant to adjournment, at 10:15 a. m., in room 324, Senate Office Building, Senator Arthur Capper, chairman, presiding. Present: Senators Capper (chairman), Aiken, Bushfield, Young, Thye. The CHAIRMAN. The committee will come to order. The committee will resume the hearing on Senate bill 1322, to provide a Federal charter for the Commodity Credit Corporation. This morning we have Mr. Frank Weitzel, Assistant to the Comptroller General, General Accounting Office. Mr. Weitzel, we will be glad to hear from you. STATEMENTS OF FRANK H. WEITZEL, ASSISTANT TO THE COMP- Mr. WEITZEL. Between 20 and 25 years, Mr. Chairman. The CHAIRMAN. You have? Mr. WEITZEL. Yes, sir. The CHAIRMAN. You got an early start. Mr. WEITZEL. Rather early. The CHAIRMAN. Well, you are doing good work. Mr. WEITZEL. Thank you very much, sir. It is always a pleasure to be up here with you, sir. I believe, Mr. Chairman, that I was on the second page of my statement yesterday. We have taken the opportunity, with the additional 24 hours, to revise our statement slightly and have, at the request of the chairman, furnished a copy of our revised statement to the Department of Agriculture, the Commodity Credit Corporation, so that they might have an opportunity to analyze it and to the extent they think desirable to answer it. The CHAIRMAN. I thought you made a very interesting statement yesterday. Mr. WEITZEL. Thank you, sir. I want to say again, though, for the benefit of all concerned that the General Accounting Office is an agency of the Congress. 74439-48- -6 77 We have no ax to grind and we ask nothing for the General Accounting Office. We are merely making these suggestions to give the Congress an opportunity to adopt measures that we feel would be desirable if the committee and the Congress agree. I want to say, too, that these suggestions are based in a large part upon the results of our audits of the Commodity Credit Corporation which, as I pointed out yesterday, have not been cleared with the Comptroller General due to the time situation, and I will of course expect the Commodity Credit Corporation to make whatever observations they think proper about these suggestions. That will leave it for the committee to decide what it thinks the proper action will be. We do not pretend to be the last word on these points. The first point I had in mind, and all of these suggestions are intended to perfect the bill and not as policy suggestions, is page 1, line 5, in section 2. We believe a more detailed and specific statement of purpose than "promoting the general welfare" is desirable. One way of accomplishing this is by deleting the words "promoting the general welfare by" from line 6 and changing the word "by” to "of" in lines 7 and 11. Considering the significant effect of programs of the type conducted by the Corporation on the domestic economy, including the prices of agricultural commodities to consumers, it appears desirable also for the statement of purpose to include language in this respect. Our suggestion for deleting the above matter stems from the fact that the Corporation, in the past, has verged on taking a position in this respect which was tantamount to declaring the Corporation's powers are almost as broad as the general welfare clause of the Constitution itself. The prepared statement cites here a memorandum of the acting president of CCC, in 1940, stating essentially this position to the Solicitor of the Department of Agriculture. Next is page 4, line 15. That is in section 4, the general powers of the Corporation, subsection (i), which provides that the Corporation may borrow money subject to any provision of law applicable to the Corporation. We believe it to be desirable for Government borrowing to be centralized in the Treasury Department. To this end we recommend that this section be changed to require the Corporation to obtain all borrowed funds from the Treasury of the United States. This is a general principle which we feel should apply generally to all Government corporations. There may be some necessary exceptions in the case of some programs of certain of the corporations. Senator THYE. May I interrupt by asking this: Where have they borrowed their money heretofore? Mr. WEITZEL. They have been authorized to borrow from the Secretary of the Treasury or from the public; also, from the Reconstruction Finance Corporation. The General Accounting Office feels that public debt operations should be centralized within the Treasury Department, and it will bring about a better over-all coordination of the Government borrowings generally to have them handled in that manner. The Corporation may want to tell you that on certain of their programs they use the facilities of banks and outside financing agencies, which may introduce some complications in the application of this principle. Senator THYE. You have examined their records, and therefore you can speak with positive knowledge of where they obtained it. When they obtained it from local banks on the phases of the program which came under their jurisdiction, were they making the funds available when they borrowed from the local banks through commodity loans? Mr. WEITZEL. May I ask Mr. Blakemore to answer that, or Mr. Simpson? Senator THYE. If it is a question of commodity loans, it would be better to have that commodity loan handled by the local bank than by the United States Treasury. Mr. WEITZEL. Mr. Blakemore? Mr. BLAKEMORE. They have utilized local banks for a number of programs. Senator THYE. On those commodity loans? Senator THYE. Why do you object to that type of financing when the local banks have to make their living upon the loans and investments they have there? Where would be the objection in the event a producer in that country wanted to take a loan on 500 bushels of corn under the provisions of the triple A Act? Mr. BLAKEMORE. We have no objection to the utilization of the local agencies. Senator THYE. Why would you not favor that rather than raising the objection as you are now doing? Mr. BLAKEMORE. The pertinent point, relative to this section is that in connection with some of those programs where they are utilizing private lending facilities, the loans made by those facilities and the Corporation has to take those loans up on demand of the local banks or in the event that the original borrower defaults. On that particular type of borrowing, for example, the amount of that on June 1945 was about $86,000,000, and it is not subject to or is not included in the amount which is, you might say, deducted from the Corporation's total borrowing authority. Senator THYE. I am not at all satisfied that the Commodity Credit Corporation has been unwise in its operations in that manner. Suppose your local county committees have received the applications and have made the appraisals, and they have recommended that this commodity be placed under a loan. After they have these applications for loans and they submit them to the local bank and the local bank proceeds to advance the money necessary and holds this commodity mortgage, then you have transacted that business in the local community. It is not necessary to include that application for loan in the operation of a regional or a district office or the headquarters down here. In other words, you have transacted it locally, and you have eliminated the district office giving consideration to the application, and this central office giving consideration to the application. If we followed your recommendation, I am afraid we would only broaden and increase the number of employees down here to act upon that they do not agree with all that we will probably recommend. But we have worked very closely with the Corporation, kept them advised of what we were proposing to recommend, and will continue to do so, until the report comes up to Congress. We naturally hope that they will agree with a majority of the things we say, but we would rather have them speak for themselves. Senator LUCAS. How many different agencies of government is the Comptroller's office working on at the present time, in the way of bringing everything up to date? Mr. WEITZEL. I might say all agencies, Senator. But on the corporation work particularly we started out with, I believe, 101 Government corporations. That number has been reduced now by abolitions and consolidations, but we are strenuously working-and I mean by that we are working day and night-to bring up to date the entire corporation audit program because of just such occasions as the ent one. pres We feel that one purpose of enacting the Government Corporation Control Act was to enable Congress to be advised of what is going on in Government corporations like Commodity Credit Corporation and to take action based on that knowledge. Senator LUCAS. Is the slowness in bringing these corporations up to date caused by a lack of personnel? Mr. WEITZEL. It has been largely, Senator, and I mean by that, lack of qualified personnel. It is extremely difficult to get the right person to make an audit of this type. This is a comprehensive, over-all audit with a report to the Congress of the condition of Government corporations, the results of their operations, and pertinent comments on those matters. And it is impossible to take an ordinary auditor and have him go into a several billion dollar operation and come up with anything of value. Senator LUCAS. I agree with you. But Congress imposed this duty on the Comptroller's office in 1945. Mr. WEITZEL. That is correct, Senator. Senator LUCAS. This is 1948. A period of over 2 years has elapsed, and you have not completed this audit at this time on the Commodity Credit Corporation to the point where you can really advise the Congress as to what we ought to do. Mr. WEITZEL. That is correct, Senator. We have advised many committees that we have appeared before, including the Appropriations Committees of both Houses, of the exact situation, and have received much assistance from them. But the largeness of the project and the amount of spade work to be done in making the first audit reports, was tremendous. We have followed the policy of trying to put out a high-standard report which will be of some real value. We recognize that in the case of Commodity Credit the first report will come rather late, but we still hope to have it here in time to help Congress decide this very question. Mr. ELLIS. Could I break in on that just a moment? I think I should say in the matter of delay, I do not know whether the Senator has been advised, practically all the reports for fiscal 1945 have been up here, long since, and most of the 1946 reports. The delay is due to not only the sheer size, but as testified, to the impossible state of the records. Senator LUCAS. I find this: Congress passes a law and places a tremendous responsibility upon some agency, and then will not finish the job by giving the proper personnel to do that job. That is what I am complaining about. Mr. WEITZEL. I understand your point, Senator. Senator LUCAS. In other words, if Congress passed a law placing this responsibility upon the Comptroller's office, Congress should not hesitate to give that office whatever personnel is necessary to bring these corporations up to date within a reasonable length of time. It does seem to me that 2 years is a long time. Mr. WEITZEL. It is, indeed. I want to say that Congress has given the Comptroller General the utmost support. It has simply been a situation where no one could get the proper personnel to do a job like this, in view of the size of the job. It is the biggest auditing job in the world, and the people simply were not available to do the job anywhere in the United States. We have had the assistance of the American Institute of Accountants of local accounting bodies, and of congressional committees, and every possible assistance from the Bureau of the Budget and the Civil Service Commission. But there just are not enough high-grade public accountants in the United States available and obtainable to perform a job of the size that Congress imposed on the Comptroller General, and one that we think we should have, without some delay. Senator THYE. How many days a year are you privileged to work in your office. I recognize that there are five of you here before us now. You have been here all morning. I have also witnessed the fact that you have been before many other committees. I am just wondering how much of your time is actually permitted to be spent in audit work, or how much of your time is spent in the manner that you are spending it this morning, the five of you. Mr. WEITZEL. Senator, it would be difficult to estimate that. The particular job of Mr. Ellis and myself is to appear before congressional committees that is one of our jobs-and to assist them in matters concerning the General Accounting Office. Senator THYE. I asked the question off the record when you gentlemen first came in here, as to why it was necessary for the five of you who are qualified auditors to spend your valuable time to appear before this committee this morning. I asked that because I recognize that you are unable to do the work and have been unable to come forward with the report. Mr. WEITZEL. One answer to that is that due to the lack of time that we had to prepare the statement it was necessary to consult until the last minute. Our man sat up all night preparing the statement. It is our job to make the audit reports, but unless Congress makes use of the information in the reports we feel that it is a futile job. So we are glad to explain anything in our audits, and to try to make our points clear for the benefit of committees of the Congress. We feel that is part of our job. That is why Mr. Blakemore and Mr. Simpson are here. They are assistant directors of the Corporation Audits Division. But, of course, they have many others working under them who are still on the job back at Commodity Credit Corpo ration. Senator THYE. That is the reason I asked the question. I just wanted to know whether there were a lot of lieutenants assigning them |